The Climate Bonds Initiative has set up a working group to develop criteria for the certification of energy efficiency-related bonds, and is expecting its solar working group to issue a standard within the next few months.

The energy efficiency working group, which includes representatives from the International Energy Agency, the European Bank for Reconstruction and Development, the US Green Building Council, Low-Carbon Australia, and the Office of the State Treasurer of California, held its first teleconference last week.

“For the moment, there is only a modest market of bonds linked to energy efficiency,” said Sean Kidney, chairman of the Climate Bonds Initiative. “But large-scale improvements in energy usage are essential for a transition to a low-carbon economy, both to quickly reduce emissions and to buy time while we transition to clean energy.”

“We expect to see a large energy efficiency bond market emerge in coming years; certification under the Climate Bonds Standard will provide investors with assurance about the environmental benefits of specific projects”.

Eligibility criteria are expected to be published by the end of this year.

Kidney told Environmental Finance that the initiative is in discussions with two prospective issuers of of bonds linked to solar projects, which is adding urgency to the work of the solar working group. It expects to issue its standard “by the end of Autumn”, he said.

Meanwhile, a bioenergy working group is “on the starter’s block”, he said, and will initially focus on biofeul for aviation. Kidney suggested that, when the price of oil rises, “there will be an explosion in aviation biofuel” as producers become cost-competitive with kerosene. “We want to be there with standards when that happens,” he added.

The not-for-profit Climate Bonds Initiative was set up to promote large-scale investment in the low-carbon economy, by establishing environmental performance standards against which bonds can be certified.

Such certification is intended to reassure investors that the green bonds in which they invest meet their stated environmental goals.

Its first standard, for bonds linked to wind energy projects, was published last November. However, while a bank is understood to have prepped the first Climate Bonds Initiative-certified bond, it has yet to be placed.